Growth-focused portfolio with strong US exposure and moderate diversification across sectors

Report created on Dec 6, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

This portfolio is heavily weighted towards the Vanguard S&P 500 ETF, comprising 70% of the total assets. The remaining 30% is split equally between Avantis® U.S. Small Cap Value ETF and Vanguard Total International Stock Index Fund ETF Shares. This composition reflects a strong bias towards large-cap US equities, with a smaller allocation to small-cap US stocks and international equities. Such a structure can drive growth, particularly in a bullish US market, but it also means the portfolio's performance is closely tied to US market trends. To mitigate risks, consider diversifying further into other asset classes like bonds or real estate.

Growth Info

The portfolio has demonstrated a solid historical performance with a compound annual growth rate (CAGR) of 16.56%. However, it also experienced a significant maximum drawdown of -35.6%, indicating vulnerability during market downturns. This highlights the trade-off between high returns and increased risk. While past performance can provide insights, it's not a guarantee of future results. To manage potential downturns, consider strategies like setting stop-loss orders or periodically reviewing and rebalancing the portfolio to align with your risk tolerance.

Projection Info

Utilizing Monte Carlo simulation, this portfolio's potential future outcomes were projected using historical data. The simulation, consisting of 1,000 iterations, suggests a median portfolio growth of 546.31% over the investment horizon. However, the range of outcomes varies significantly, with the 5th percentile at 38.36% and the 67th percentile at 865.2%. While simulations offer valuable insights into potential risks and returns, they are limited by the assumption that historical trends will continue. Regularly reviewing and adjusting your investment strategy is crucial to adapt to changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, accounting for 99.7% of the total assets. This heavy reliance on equities can lead to substantial growth during bull markets but also exposes the portfolio to higher volatility. Having a mix of asset classes, such as bonds or commodities, can improve diversification and reduce risk. Consider adding fixed-income assets to provide stability and potentially cushion against equity market downturns. Balancing growth with risk management is key to achieving long-term financial goals.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is led by technology, which comprises 26% of the portfolio, followed by financial services and consumer cyclicals. This reflects a concentration in sectors known for growth, but it also implies sector-specific risk. A downturn in the tech industry, for example, could significantly impact the overall portfolio performance. To mitigate this risk, consider diversifying into underrepresented sectors like utilities or consumer defensive, which may provide stability during economic downturns.

Regions Info

  • North America
    85%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The geographic allocation is predominantly focused on North America, with 85.4% of assets in this region. This strong regional bias offers exposure to the US market's growth potential but may limit the benefits of global diversification. Including more assets from emerging markets or other developed regions could enhance diversification and reduce regional risk. Broader geographic exposure can help stabilize returns by balancing the performance of different economies.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

Click on the colored dots to explore allocations.

The portfolio could potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. This involves adjusting the current asset allocation to achieve a more efficient balance, potentially enhancing returns without adding risk. However, it's essential to note that optimization is limited to the existing assets within the portfolio and does not inherently address diversification across different asset classes or regions. Regular rebalancing and strategic adjustments can help maintain an optimal risk-return profile.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.50%

The portfolio's overall dividend yield stands at 1.5%, with the highest contribution from the Vanguard Total International Stock Index Fund ETF Shares at 2.9%. While dividends provide a steady income stream, the current yield is relatively modest. Investors seeking higher income could explore adding dividend-focused investments or increasing exposure to high-yield sectors. Balancing growth and income is crucial, as focusing solely on dividends may limit capital appreciation.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

The total expense ratio (TER) for this portfolio is 0.07%, which is relatively low, thanks to the Vanguard S&P 500 ETF's minimal cost of 0.03%. Keeping costs low is vital for maximizing long-term returns, as high fees can erode gains over time. Regularly reviewing and comparing the expense ratios of your holdings can help ensure that you're getting the best value. Consider switching to lower-cost funds if they align with your investment strategy and goals.

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